In this installment of our Housing Element series, we focus on a new objective of the proposed 2009 San Francisco Housing Element. You’ll remember from our last update on this subject that the Planning Department is in the process of updating its Housing Element, as is mandated by state law. The purpose of developing and adopting a Housing Element is so each city and county will “consider economic, environmental, and fiscal factors and community goals set forth in [its] general plan and [will] cooperate with other local governments and the state in addressing regional housing needs.”

The 2009 Housing Element contains a new objective (Objective 10), which states that the city should “ensure a streamlined, yet thorough, and transparent decision-making process.” We see this as a positive step – as a city, we would be recognizing that our entitlement process needs to be improved, which would provide justification for future changes to the system. Changes to make the process more efficient and faster could lead to lower housing costs, which is a major goal of the housing element. While we are hopeful, there have been many unsuccessful attempts to improve the process in recent years. While a high-level statement in the Housing Element is helpful, everyone that is part of the entitlement process and wants to see change must re-double their efforts. We consider below two attempts at recent reform, as well as the elephant in the room: the unwieldy, unmanageable and increasingly obstructionist CEQA process.

Discretionary Review Reform

Later this month, the Board of Supervisors’ Land Use and Economic Development Committee will hold its fourth hearing on the proposed amendments to the discretionary review (DR) process. Reforming the DR process would go a long way towards stream-lining the permitting process for small projects. DR, which is normally initiated by a member of the public or a community organization, requires the Planning Commission to hold a hearing on any building permit before it is issued. This hearing is required if requested, even if the project complies 100% with the Planning Code and guidelines. At the hearing, the Commission holds a vote to effectively approve, modify or disapprove a project. This means that the Planning Commission has on its calendar every week disputes between neighbors about things like how far back into the rear yard someone’s addition extends, or if a third story is allowed for a new home. These may in fact be important issues to those involved, but they don’t belong at the Planning Commission. They need to be resolved by the Planning Department in some other way.

Even though the City Attorney’s office opined in 1954 that DR is “a sensitive discretion and one which must be exercised with the utmost restraint,” there were 230 publicly-initiated DR cases in 2004 alone, and 126 in 2008. In addition to all the other problems this causes, the ease and frequency of filing of DR cases significantly slows the entitlement process and increases its uncertainty, which, in turn, increases the cost of housing.

The most promising aspect of the DR reform package, with the best chance of streamlining the process, is the elimination of the automatic hearing of DR cases before the Planning Commission. Currently, every DR case is entitled to a hearing, no matter how frivolous the complaint is. This adds time and cost to the development process and, most importantly, adds the uncertainty of a public hearing and vote. The DR reform package would empower staff to review each DR case for its compliance with the Residential Design Standards. If the project substantially complies with the Code and the Standards, the DR case will not be heard by the Planning Commission. In a test run of staff’s recommendations over the past year, the Planning Commission has agreed with staff on whether a hearing should be held 95% of the time. While not perfect, this staff review will significantly streamline the entitlement process, which would still allow appeals of staff decisions to the Board of Appeals.

We’ll keep you posted on upcoming hearings at the Board of Supervisors regarding DR reform.

Certainty in Zoning

Proposed Policy 10.2 of the Housing Element would set as city policy the need to reduce other discretionary processes such as the conditional use approval requirement. Just like DR cases, conditional uses add uncertainty to the entitlement process and can unnecessarily increase the cost of constructing new housing.

The city sought to achieve a relaxation of conditional use requirements in its recent Eastern Neighborhoods rezoning. Many of the new zoning districts created by the rezoning made standard housing projects permitted as of right, a major improvement on the industrial districts they replaced, which permitted housing only as a conditional use. However, the Eastern Neighborhoods rezoning fell short of the goal of truly streamlining the entitlement process for housing. A new Planning Commission review process was created for certain “large” projects, including those creating 25,000 square feet or more of new space. Such a low threshold ensures that most new housing projects will require review by the Planning Commission, defeating the purpose of making residential uses permitted as of right, just as the City was trying to do the right thing by making housing easier to build.

Housing developers should be given a clear set of zoning rules to follow, and not be subject to unpredictable public hearings for housing projects that fulfill many of the goals of our Housing Element. Along that vein, proposed Housing Element implementation measures 69 calls for the Planning Code to “clearly specify development that is principally permitted, and limit conditional use requirements.”

CEQA Streamlining

The CEQA process was born out of the environmental movement in the early 1970s with a simple and direct mandate: before doing anything that could have a major effect on the environment, we should gather the relevant information so that the public and the decision-makers are able to consider all the facts when making decisions about physical changes in our environment (i.e. development projects). What was originally a straightforward, information-gathering and reporting process has evolved over the last 40 years into a massive regulatory construct that dramatically increases the cost of development without providing any significant benefit to the public or the environment. Should CEQA be repealed? Of course not. Could there be significant and meaningful changes in the CEQA process that would take it back to its original roots of providing meaningful and usable information in an unbiased manner so that the public and the decision-makers can then decide what to do with a project? Yes.

Over the years, CEQA has become a battleground between developers and those that don’t like development. It is no longer an information gathering process. It is routinely used by project opponents to drive costs up and slow things down. In San Francisco, the Board of Supervisors routinely hears CEQA appeals where the project consists only of alterations to a single-family home. The CEQA burden on the Planning system in San Francisco is substantial. All you have to do is look at how the Planning Department staff is divided up to see just what a massive amount of CEQA work is done in San Francisco: the Neighborhood Planning division that reviews permits and projects to determine consistency with the General Plan, the Planning Code and other policies, has 31 planners assigned to deal with virtually every project in the City. The Planning Department’s CEQA division (called MEA, for Major Environmental Analysis division) whose sole purpose is to try and keep the City in compliance with CEQA, has 27 planners.

Where can reform start? Unfortunately, CEQA is a state law and must be changed by the lawmakers in Sacramento; there is no quick fix at the City level. Until 2003, in San Francisco only EIRs were appealable to the Board of Supervisors, ensuring that only the largest and most complex cases reached this Board. The process was not nearly as political, and seemed to work relatively well compared to where we are now. Amendments to CEQA in 2003 unfortunately allowed any CEQA determination to be appealed, even exemption determinations (i.e. rulings that CEQA did not apply). That is why the Board hears so many appeals that deal with modest changes to single family homes. To close that loophole and return us to saner days would make an enormous difference in San Francisco. Locally, however, there are a variety of streamlining mechanisms that the Planning Department is moving on to attempt to speed up the process and get the CEQA document finished sooner. One of those in the works is a change for traffic studies that would move away from the level of service analysis and to a mitigation fee-based system. We strongly support this approach which could dramatically speed up transportation analysis for many projects.

Conclusion

It’s good news that the City’s Housing Element may someday include an objective that pushes for a streamlined, thorough and transparent decision-making process for housing projects. But that’s just the beginning. We all need to make sure the city follows through and actually turns policy into practice.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.

 

 

SHADOW UPDATE: Rules Committee to Hold Hearing on Park Sunlight Protection Initiative this Thursday

The Park Sunlight Protection Initiative that we reported to you on last week is moving quickly through the legislative process. The Board of Supervisor’s Rules Committee will be holding a public hearing on the initiative this Thursday, February 4, at 10:00 a.m. in Room 263 of City Hall. This will be the only chance for the public to comment on this draconian initiative, which would effectively put a number of major development projects in the city at risk. While the hearing starts at 10 am, this item is last on the agenda, and we expect the earlier matters to take some time. The shadow measure may not be called until early afternoon or later.

The only way that this comes off the June ballot is for at least two of the Supervisors who have signed onto it to rescind their support. Supervisors Chiu, Maxwell, Mirkarimi, Mar and Campos are currently supporting the measure. If you can’t make the hearing, be sure to voice your opposition to the Supervisors’ offices during the week. This initiative amounts to a major downzone of the City’s downtown, and would significantly reduce the value of our investments in public transit, including the Transbay Terminal and Central Subway. Contact Daniel Frattin for more information.

Interim Affordable Housing Controls Seek to Limit Reach of Palmer Decision

Today the San Francisco Board of Supervisors will consider new interim controls for affordable housing requirements. The City is re-writing its affordable housing provisions in light of a landmark case, Palmer/Sixth Street Properties, L.P. v. City of Los Angeles. We reported on Palmer in our Oct. 29, 2009 Update. Palmer held that inclusionary housing ordinances that require on-site affordable rental housing or payment of an in-lieu fee are preempted by the Costa-Hawkins Act and thus unenforceable. The City is drafting a new ordinance in the hopes of preventing a Palmer challenge to its ordinance; the interim controls will be in place until then.

The interim controls act as a placeholder, as they put in place the City’s new draft affordable housing ordinance for the next 18 months, or until a final replacement ordinance is adopted. The interim controls and draft new ordinance would remove the on-site requirement and reference to an in-lieu fee. Instead, project sponsors would be required to pay an “affordable housing fee,” now essentially an impact fee supported by a previously conducted nexus study, As presently written, the affordable housing fee would be equivalent to the previous in-lieu fee, and those project sponsors that wished to build on-site rental housing instead of paying the affordable housing fee could elect to do so.

Before the Board of Supervisors Land Use Committee hearing on Monday, representatives of the City noted that it expects the impact of Palmer to be minimal to the City’s overall affordable housing program. Of the City’s 1,100 affordable housing units in the City, approximately 800 are owner-occupied and 300 are renter-occupied, and the City said there are few rental units in the pipeline. However, project sponsors subject to these requirements will want to keep a close eye on the interim controls and new ordinance.

The interim controls, if passed, will go into effect immediately. Contact Stephen Miller for more information, or if you would like copies of the current interim controls or proposed new ordinance.

Mayor Vetoes Avalos Eviction Protection Ordinance; Introduces Narrower Protections

On January 22, Mayor Newsom vetoed Supervisor Avalos’s eviction protection ordinance, all but killing the controversial legislation. The ordinance would have expanded the “just cause” eviction protections that currently only apply to rental properties constructed before 1979 to post-79 properties. The Board of Supervisors has until February 21 to overturn the veto with the vote of at least 8 supervisors. A veto override is unlikely at this point, since Supervisor Dufty has co-sponsored a narrower version of the legislation with the Mayor.

The new ordinance would prohibit lenders who obtained title to a post-79 property through foreclosure from evicting a tenant, except when the reason falls within the “just cause” evictions that are listed in the current rent control ordinance. This restriction lasts in perpetuity for as long as the foreclosing lender has title to the property. However, the restriction expressly does not apply to any subsequent purchaser, who would be free of any eviction controls. Contact John Kevlin for more information.

Planning Commission Recommends Passage of Mayor’s Stimulus Plan to Board of Supervisors

The Planning Commission held a hearing on the Mayor’s stimulus plan on January 21, and after a long and well-attended hearing, recommended passage of all parts of the plan to the Board of Supervisors.

The Planning Commission voted 4-3 to recommend allowing developers to defer development fees until the first certificate of occupancy if a fee equaling the city’s cost of funds is paid. Commissioners Bill Lee, Michael Antonini, Ron Miguel and Gwyneth Borden voted to recommend and Commissioners Kathrin Moore, Bill Sugaya and Christina Olague voted not to recommend. The recommendation included several amendments, including adding language to ensure automatic inflation adjustments for all fees, setting an end date for the option of fee deferrals based on some measure that the economy has improved, and excluding the fee deferral option from all projects that have paid their fees by the time the ordinance is enacted.

The Planning Commission voted 6-1 to recommend allowing a one-third reduction in affordable housing in-lieu fees in exchange for levying a 1% transfer tax on all future sales of a property. Several Commissioners emphasized their support for finding a way to collect affordable housing fees that would not be as sensitive to the ups and downs of the local economy. Commissioners Moore, Sugaya, Lee, Antonini, Miguel, and Borden voted in favor of recommendation and Commissioner Olague voted against.

The next step for the Mayor’s stimulus package will be a hearing before the Board of Supervisors’ Land Use and Economic Development Committee and then to the full Board. We’ll keep you updated on future developments. Contact John Kevlin for more information.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.

 

 

Last week, five San Francisco Supervisors submitted an initiative, the “Park Sunlight Protection Ordinance” (the “PSPO”), to the Department of Elections for the June ballot. Coming in at just under two pages, the deceptively short measure would significantly expand the City’s longstanding shadow regulations by:

– Eliminating the City’s discretion to approve projects that cast any new shade on certain parks

– Expanding shadow-protected open spaces to include Yerba Buena Center, Hallidie Plaza and UN Plaza

– Giving the Board of Supervisors power to unilaterally extend shadow protections without first consulting the Recreation and Parks Commission (“Rec/Park Commission”) or Planning Commission

– Lowering the height limit for exempt Projects

The PSPO has no phase-in provision, i.e., projects without an approved site-permit would be subject to the new regulations, even if it had already been reviewed by the Recreation & Park Commission and approved by the Planning Commission.

The net benefits of these changes would be minimal: shadows on parks are already strictly regulated by a longstanding voter-approved ordinance. However, the PSPO’s negative consequences will be far-reaching. These include new burdens on small builders, major impediments to transit-oriented development downtown, and threats to the City’s plans for new downtown parks and transit infrastructure.

Proposition K and Existing Shadow Budgets

At present, property under the jurisdiction of, or intended to be acquired by, the Recreation and Park Commission (“Rec/Park Land”) is protected by Section 295 of the Planning Code, which was enacted by voter initiative (Proposition K) in 1984. Proposition K prohibits new structures over forty-feet tall that would have adverse and significant shadow impacts on the use of Rec/Park Land. It charged the Planning Commission and Rec/Park Commission with jointly adopting standards for implementing shadow protections, including the criteria for determining whether potential shadows cast by a project should be considered significant and adverse. Proposition K itself exempts the extremely long shadows cast one hour after sunrise and one hour before sunset.

The Planning Commission and Rec/Park Commission responded by developing “shadow budgets” for all Rec/Park Land, which took into account the amount of existing shadow and park size, among other factors. The shadow budgets established an absolute cumulative limit for new shadows, with allowable increases ranging from zero net new shadow to a maximum of one percent. Rec/Park Land in Chinatown, the Financial District and Tenderloin tended to be among the most strictly regulated. Within these areas, Portsmouth Square, Maritime Plaza, St. Mary’s Square, and Boeddeker Park, among others, are allowed no new shadow. Union Square and Justin Herman Plaza are restricted to a maximum cumulative increase in shade of 0.1 percent.

In addition to the quantitative limits, the two commissions adopted qualitative criteria to determine whether shadows adversely impact the use of a park. These include evaluating the location, extent and duration of new shadows in relation to (a) the extent of existing shadows, (b) the times of day and year when a park is most active, and (c) the public good served by the building casting new shadow.

Proposition K’s Relief Valves

While the existing shadow controls have been strictly enforced, two important aspects have allowed them to coexist with the continued development of downtown. First, not all downtown public open spaces are administered by the Rec/Park Commission. The Redevelopment Agency, Port, and Transbay Joint Powers Authority each have jurisdiction over existing or planned open spaces. These spaces are currently exempt from Section 295. This has allowed the Redevelopment Agency in particular to create new parks at the center of high-density districts.

Yerba Buena Gardens is a prime example of the synergies between new parks and surrounding development. In Yerba Buena, the Redevelopment Agency strategically planned the location of private development to ensure ample sunlight would reach the park. The new private development in the surrounding area, in turn, both activated the park and generated tax increment revenue to defray the cost of building it. If shadow regulations had been applied to Yerba Buena Gardens, the SF MOMA, St. Regis, W Hotel, and Paramount would each be significantly shorter than they are today.

Second, where both the Planning Commission and Rec/Park Commission find that there is no adverse effect on the use of a park, minor new shading may be allowed. In rare instances, shadow budgets may be increased by a majority vote of both commissions. In practice, such actions are rare, involve minor increases in allowable shadow, and are granted where a project will have obvious and compelling public benefits. One example is Boeddeker Park. The area surrounding Boeddeker Park is the site of several affordable housing developments. Two recent projects, one built and the other approved, would increase shadows by approximately one-third of one percent and create nearly 250 units of affordable housing. The City chose to allow a minor increase in the shadow budget given the overwhelming need for low-income housing and the limited extent of new shadows.

Another example is the Asian Art Museum in Civic Center. The Civic Center Plaza’s cumulative shadow limit was raised from one percent to 1.12% in order to allow the adaptive reuse of the Old Main Library. Construction of the new Asian Art Museum entailed major seismic upgrades to, and rehabilitation of, the landmark building and brought an important cultural facility to the Civic Center.

The PSPO: A Defacto Downtown Downzone

The PSPO deprives the City of its discretion to make such reasonable tradeoffs between minor new shadow on public parks and major public benefits that can be created by new development. If passed, it would set in stone the existing shadow budgets for parks citywide, i.e., any future increase could only be approved by ballot initiative. This is especially problematic downtown where parks are closely spaced, buildings are tall, and many shadow budgets are set at zero.

The PSPO would also expand shadow restrictions to several new downtown open spaces. Unlike Section 295, which is limited to Rec/Park Land, the PSPO applies to anything classified as “Park Property” under Section 2.01 of the Park Code. “Park Property,” includes Yerba Buena Gardens (which is expansively defined to include all open space on the blocks bounded by Market, Folsom, Third and Fourth Streets), and Hallidie and UN Plazas.

These two changes will work in concert to downzone most, if not all, of downtown and undermine the City’s investments in transit infrastructure. Some adjustments to existing shadow budgets will be necessary in order to construct some of the taller buildings proposed in the Transit Center District Plan, including the Transit Tower. The impact fees and tax increment generated by these projects will directly fund a new five-acre park atop the Transbay Transit Center and are critical to the financial feasibility of bringing high-speed rail and the CalTrain Extension to the heart of downtown. Under the PSPO, the City could not make the modest adjustments to park shadow budgets necessary to facilitate these projects and the massive public benefits they would provide. Without funding from the Transit Tower and other Transit Center projects, it is unclear whether the Transit Center and its park can be built.

Further to the west, the designation of Yerba Buena Gardens and Hallidie Plaza could significantly affect plans for construction of the Mexican Museum and stymie plans to allow taller development on the 4th/5th Streets Corridor, where the City is investing $1.5 billion in the new Central Subway. Extending shadow protections to UN Plaza could similarly prevent many Mid-Market projects and thwart longstanding efforts at that area’s revitalization.

New Role for the Board of Supervisors: Designating New Parks and Approval Rights for Changes in Shadow Criteria

Today, Proposition K provides a very specific process to designate land for acquisition by the Rec/Park Commission and impose shadow regulations on surrounding development that could potentially shade it. The Planning Commission and Rec/Park Commission must hold a joint hearing, at which each Commission, with the concurrence of the Board of Supervisors, must vote to recommend the property for acquisition from the Open Space Acquisition and Park Renovation Fund and placement under the jurisdiction of the Rec/Park Commission.

This process ensures that new park designations are integrated with the Rec/Park Commission’s long-term capital plans and are consistent with the goals and policies expressed in the City’s General Plan. By contrast, the PSPO eliminates the requirement for a joint commission hearing prior to a property’s designation as Rec/Park Land. Rather, the Board of Supervisors may unilaterally amend the Park Code to define a property as “Park Property”.

In addition, the PSPO gives the Board of Supervisors the right to approve any modifications to the criteria used to evaluate shadow within existing shadow budgets. This change appears to be directed at recent efforts by the Planning Department to clarify ambiguities in the existing criteria and provide a clear and consistent methodology for the conduct of shadow studies. It is not clear how a lengthier and more political process will serve either goal.

A Little Something for Everyone: New Burdens on the Neighborhood Builder

Though the most dramatic effects of the PSPO would be felt downtown, it would nonetheless apply, and could have similarly irrational results, citywide. One change would be felt most acutely by the small projects that are the bread and butter of neighborhood builders.

At present, projects under 40 feet in height are exempt from shadow limits and do not need to file shadow study applications as part of their permit review. For the past 25 years, the Planning Department has used the Planning Code definition of “height” to determine whether a building falls under the 40-foot exemption. This excludes parapets, stair penthouses and other minor rooftop features. The PSPO will alter the longstanding-and well-defined-method of measuring height and instead will exempt only those structures that measure less than 40 feet to their highest point. For some projects close to parks, the end result may be one less story of allowable development or the inability to make even minor improvements, for example, adding a roof deck. Even for small projects nowhere near parks, a shadow study will be required, adding time and new fees to a permit review process that is already notoriously slow and expensive.

Next Steps

The PSPO was submitted to the Department of Elections and Clerk of the Board of Supervisors on January 19th -the last possible date to submit the ordinance and still meet the minimum hearing requirement. The PSPO is expected to be heard at the Rules Committee, on which Supervisors Campos, Alioto-Pier and Mar sit. A hearing date has not been announced, but the PSPO could be heard at the regularly scheduled Rules Committe hearings on February 4th or February 18th. February 18th is the last possible date on which a hearing can be held. This leaves little time for the public or city officials to review and comment on the sweeping changes this initiative would have on development in the City or on its economy as a whole.

As an initiative signed by four or more supervisors, the PSPO may not be amended in committee and does not require a vote of the full Board in order to appear on the ballot. The only actions that will prevent this misguided measure from appearing on the June ballot are the withdrawal of at least two of the five supervisors who signed it: Chiu, Maxwell, Mirkarimi, Mar or Campos.

It is essential that the Board of Supervisors hear that San Francisco does not need new regulations that will have no appreciable effect on the quality of its parks, especially when they are sure to dramatically reduce the City’s physical and economic development for years to come. We will announce the date of the public hearing at the earliest opportunity.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.

 

 

Last week, the California Building Standards Commission (CBSC) adopted new, statewide green building standards-the first statewide green building standards in the nation. Dubbed CALGREEN, the regulations will go into effect on January 1, 2011, though they shouldn’t have much immediate effect on projects in San Francisco for reasons described below.

The 2010 Green Building Standards Code, as CALGREEN is officially known, will have mandatory code components and two “tiers” of voluntary components. The “tiers” of voluntary green building requirements provide ready-made means by which local governments can choose to enact higher levels of green building requirements by simply adopting the tiers into a local building code. This significantly assists smaller communities that do not have resources to devote to detailed analysis of greening their codes. Builders could also choose to build to the higher “tier” of green building, regardless of the local government’s adoption of the more stringent requirements. Local governments will still be able to maintain green building standards stricter than the mandatory codes, such as San Francisco’s green building ordinance that uses Leadership in Energy and Environmental Design (LEED) and Build It Green third-party certifications.

The 2010 Green Building Standards Code will require:

–20 percent mandatory reduction in indoor water use, with voluntary goal standards for 30, 35 and 40 percent reductions;

–Separate water meters for nonresidential buildings’ indoor and outdoor water use, with a requirement for moisture-sensing irrigation systems for larger landscape projects;

–Diversion of 50 percent of construction waste from landfills, increasing voluntarily to 65 and 75 percent for new homes and 80 percent for commercial projects;

–Mandatory inspections of energy systems (i.e. heat furnace, air conditioner, mechanical equipment) for nonresidential buildings over 10,000 square feet;

–Low-pollutant emitting interior finish materials such as paints, carpet, vinyl flooring and particle board.

The CALGREEN Code will apply to all residential, commercial, hospital and school buildings, as opposed to some existing green building ordinances, such as that of San Francisco, which applies only to limited building occupancies.

Local government building departments will be responsible for implementation of CALGREEN, just as with all other State health and building codes. CALGREEN requires field inspections to determine compliance.

CALGREEN may challenge the long-term viability of third-party rating systems, such as the U.S. Green Building Council’s LEED rating system. For instance, the CBSC has stated in a press release that a key benefit of CALGREEN is that it “will allow California’s builders to build to a certifiable green standard without having to pay costly fees for third-party programs.” In turn, the U.S. Green Building Council, sponsor of the LEED rating system, as well as other environmental groups, opposed the CALGREEN standards, claiming that they would confuse the market.

So what will CALGREEN mean for San Francisco projects? Here are a few possibilities. First, it is likely that most standards of San Francisco’s green building ordinance already exceed those of the new mandatory CALGREEN standards. As a result, CALGREEN will not “preempt” San Francisco’s existing green building ordinance, and thus San Francisco can continue to implement its ordinance as written, which requires compliance with LEED and Build It Green private rating systems. Second, while San Francisco can continue to implement its ordinance requiring compliance with third-party rating systems, it will be important for projects to also check the CALGREEN regulations to determine whether some aspect of mandatory CALGREEN requirements applies where San Francisco’s green building ordinance does not. For instance, San Francisco’s current ordinance only applies to B, M, and R occupancies, while CALGREEN will apply to a wider range of building product types. Third, practitioners in San Francisco will want to be familiar with both CALGREEN and the third-party rating systems (such as LEED and Build It Green) regardless of the immediately applicable standard. Knowing both systems will be helpful not only in achieving compliance today, but also in marketing green buildings to buyers and tenants, and addressing any future market trends as to which rating systems ultimately prove to have more cache.

CBSC plans to place final text of the adopted 2010 Green Building Standards Code on its website, “www.bsc.ca.gov”, for download no later than the end of the month.

In the meantime, you can read more about CALGREEN at: “http://gov.ca.gov/press-release/14186/.”

Reminder: Mayor’s Stimulus Package Hearing to be Heard at 11 a.m. Tomorrow

The Planning Commission will hold a public hearing on the Mayor’s stimulus package tomorrow, January 21, at 11:00 a.m. in room 401 of City Hall (unlike the typical Planning Commission meetings that begin at 1:30 p.m.) Again, we urge everyone who is able to attend to do so and voice their support at this hearing.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.

 

 

New Hearing Date: Stimulus Package Hearing at Planning Commission Moved to January 21

The Planning Commission has rescheduled its hearing on the Mayor’s stimulus package from this Thursday to next Thursday, January 21. Again, we urge everyone who is able to attend to do so and voice their support at this hearing. The hearing begins at 1:30 p.m. in Room 401 of City Hall.

Avalos Eviction Protection Ordinance is Passed by Board of Supervisors

The eviction protection ordinance that Supervisor John Avalos introduced last year passed the Board of Supervisors on Tuesday. The ordinance now goes to the Mayor’s desk, who has publicly stated his opposition to the measure. The Board of Supervisors would need 8 votes to override a Mayoral veto.

The Avalos ordinance, as we reported to you last month, would expand foreclosure protections, currently only applicable to rental properties constructed before 1979, to all rental properties. Avalos first justified the measure by saying it would protect tenants who lived in post-79 buildings that were foreclosed on by banks and lenders, which now have the ability to evict tenants for any reason. However, as interested parties researched the ordinance in greater depth, it was clear that the measure was not narrowly applicable, and that it would put enormous new burdens on all owners of post-79 rental properties.

The Mayor has stated his intent to introduce a new, narrowly-focused ordinance that would protect tenants in post-79 rental properties that have been foreclosed on by a bank or lender. We’ll continue to keep you posted on future developments.

Concern Grows That Proposed Air Quality Guidelines Could Slow Infill Development

First came AB 32, which requires California’s greenhouse gas emissions to be reduced to 1990 levels by 2020. Then came SB 375, which seeks to reach AB 32’s goal by curbing sprawl and incentivizing urban, transit-oriented, infill development. Now the Bay Area Air Quality Management District’s new CEQA guidelines for analyzing very small particulate matter (PM) from new projects located near highways could thwart these efforts.

BAAQMD, tasked with developing CEQA air quality review guidelines for Bay Area jurisdictions, has proposed that PM emissions from a new source (i.e. development) be considered significant for the purposes of CEQA if PM 2.5 levels (particulate levels for the smallest particles) increase even slightly. Unlike PM 10 particles (large particulates like most diesel exhaust) that have been heavily regulated for years, PM 2.5 particles (smaller particulates like sulfates and nitrates formed from power plants, motor vehicles, and other sources) are now subject to stepped up regulatory standards. But PM 2.5 particles are much more prevalent and therefore will be harder to control. These new PM 2.5 levels, if adopted, will impose very costly additional studies and mitigation measures on even the most environmentally-friendly, transit-oriented projects.

Due to growing concern from developers, and now local jurisdictions, BAAQMD has continued a public hearing where it intended to adopt the proposals to April 7. During this time, BAAQMD will continue its public outreach on the proposal.

We believe these standards are bad for cities, bad for development, and bad for the environment. Ironically, the proposed guidelines would actually work against SB 375’s efforts to incentivize urban infill development.

The draft CEQA guidelines can be found at “http://www.baaqmd.gov/Divisions/Planning-and-Research/Planning-Programs-and-Initiatives/CEQA-GUIDELINES.aspx”. We’ll keep you posted on further developments.

New Secretary of State Alert for Bogus Business Solicitations

The California Secretary of State issued another warning regarding misleading solicitations sent to California corporations and LLCs. The bogus letters encourage business owners to submit $495 to a private company named Business Filings Division in order to dissolve their business entity. Although these solicitations may appear legitimate and contain an official-looking seal, they are not being made by or on behalf of any government entity. Be advised that there are no filing fees for submitting dissolution documents to the Secretary of State. The bogus forms do not meet state law requirements for dissolution of a business entity, and will not effectively dissolve a corporation or LLC.

Suspicious solicitations may be reported to the California Attorney General’s office, Public Inquiry Unit, P.O. Box 944255, Sacramento, California 94244-2550. A complaint form, which can be completed online and printed to mail, is available on the California Attorney General’s website at “www.ag.ca.gov/consumers/general.php.”

If you have any concern that a form regarding your corporation or LLC may be a bogus solicitation, you should contact your corporate attorney or Jay Drake at Reuben & Junius, LLP.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.

 

 

Stimulus Package Hearing at Planning Commission on January 14

As we’ve reported to you last year, the Mayor’s office has introduced a stimulus package to spur new activity in the development community. The Planning Commission will be the first city body to review the plan. We urge everyone to attend and voice their support at the Commission’s January 14th hearing. The meeting begins at 1:30 p.m. in Room 400 of City Hall.

To recap, the stimulus package includes two major reforms. The first would simplify city development fees by creating a new unit at the Department of Building Inspection that would serve as the one-stop shop for information on fees and collection of fees. In addition, all development fees would be due prior to issuance of the first building or site permit. However, project sponsors could delay payment of all development fees until issuance of the first certificate of occupancy. The only extra charge for this fee deferral would be an annual fee equal to the city’s cost of funds.

The other major piece of the stimulus package would allow project sponsors to indefinitely delay payment of 33% of their inclusionary housing requirements or Jobs-Housing Linkage fee requirements. In exchange, the project sponsor would have to record a Notice of Special Restrictions on the property’s title that would charge a transfer tax equal to 1% of the value of the property upon each successive sale.

Please email us if you have any questions, or view our more detailed earlier Update at “https://www.reubenlaw.com/index.php/rj/singleUpdate/mayors_real_estate_development_stimulus_plan_moves_forward/.”

Mayor’s Task Force: Cut Commercial Building Energy Use 50% by 2030

In addition to the news last month that the Transamerica Pyramid has achieved LEED Gold certification, the Mayor’s Task Force on Existing Commercial Buildings released a report with recommendations on how to reduce San Francisco’s greenhouse gas emissions through the greening of existing commercial buildings.

The operation, construction and demolition of buildings accounts for almost half of San Francisco’s greenhouse gas emissions and commercial buildings account for 63% of building-sector emissions. The task force has recommended the city set a goal of reducing existing commercial building energy use 50% by 2030. The task force recommends policy steps that can be taken to reach this goal, including requiring buildings to conduct an energy audit every 5 years, producing a “green tenant toolkit” to educate commercial tenants on how to reduce energy usage, requiring sub-metering for each individual commercial tenant, and implementing a public education campaign to teach building owners and commercial tenants how to reduce energy usage.

The task force has merely made recommendations to the Mayor. Legislation would need to be introduced to implement these measures. We will keep you posted on further developments.

You can find the full report and an executive summary at “http://www.sfmayor.org/press-room/press-releases/press-release-transamerica-goes-green/.”

State Agency Adopts Final CEQA Guidelines Regarding Greenhouse Gas Emissions

On December 30, 2009, the California Natural Resources Agency adopted final CEQA guidelines regarding greenhouse gas emissions. The rulemaking process took under a year, commencing last April.

Senate bill 97 requires lead agencies to evaluate, during its CEQA review of projects, the impact that a project’s greenhouse gas emissions will have on the environment. These new regulations provide guidance on how a lead agency is to determine the significance of impacts from a project’s greenhouse gas emissions. In addition, the regulations authorize program-level documents, such as a general plan, to include a greenhouse gas emissions analysis that future, project-level documents can tier off of. Lead agencies can also develop a new type of plan, a plan for the reduction of greenhouse gas, that can also be tiered from.

The final regulations are posted at “http://ceres.ca.gov/ceqa/guidelines/.”

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Copyright 2010 Reuben & Junius, LLP. All rights reserved.

 

This is the first in an occasional series of commentaries the Reuben & Junius Update is publishing on San Francisco’s ongoing process of adopting a new Housing Element. The Housing Element is one of the mandatory elements of the City’s General Plan. The General Plan is the City’s most basic and comprehensive planning document. As described by the late Daniel Curtin in his annual “California Land Use and Planning” handbook, the General Plan “provides the blueprint for development throughout the community, and is the vehicle through which competing interests and the needs of the citizenry are balanced and meshed. The General Plan addresses all aspects of development, including housing, traffic, natural resources, open space, safety, land use, and public facilities.” So the General Plan is the “big picture” document that states City policies and objectives in broad strokes. It is very different from the City’s zoning ordinance (Planning Code), which is very detailed in its implementation of all zoning and land use matters, including, of course, the furtherance of the policies in the General Plan. The General Plan and the City’s zoning ordinances must be consistent.

The complete General Plan is located on the San Francisco Planning Department’s website. San Francisco’s General Plan is broken into two parts, the main plan elements under Section 1 (which includes seven mandatory elements required by state law), and a series of 15 different “area plans.” The area plans focus on discrete geographic areas of the City and provide for a more detailed series of plans and objectives related to each specific area.

State law requires that the Housing Element be updated periodically, usually every five years. That didn’t happen for a while, as there was a long, 14-year gap between the City’s 1990 Housing Element (then called the Residence Element) and the 2004 Housing Element. The 2004 Housing Element was challenged in court. The challengers claimed that the Housing Element could not be adopted without preparation of a full environmental impact report (EIR) pursuant to the California Environmental Quality Act (CEQA). The California courts agreed and directed the City to prepare an EIR for the 2004 Housing Element. Because there has been yet another rather long gap between the 2004 Element and where we are today, the Planning Department is preparing an EIR that will cover both the court’s mandate for the 2004 Element as well as analyze the environmental effects of the proposed 2009 Housing Element.

On September 2, 2009, the Planning Department issued a Notice of Preparation of an EIR report for the 2004 and 2009 Housing Element. That document is also available on the Planning Department website and presents what we believe to be a very good comprehensive overview of both elements (2004 and 2009) as well as the CEQA process they are undertaking and how they will be approaching the issue of environmental effects under CEQA. Planning staff has recently completed an EIR scoping meeting to set the parameters of the CEQA review. Earlier this year, the Planning staff hosted a series of meetings and workshops throughout the City to hear directly from interested parties what their housing priorities and needs were. Planning’s website indicates that they hope to publish the Draft EIR by in the spring of 2010, with a Final EIR and adoption by the Planning Commission and Board of Supervisors later next year. However, you don’t have to wait for the Draft EIR to see the Draft 2009 Housing Element. It is also available on the Planning Department’s website “http://housingelement2009.sfplanning.org/”

In the coming months, we will be taking a closer look at a variety of the different policies and objectives of the Draft 2009 Housing Element. Not surprisingly, the document continues to ratchet up the pressure on the City to find ways to create and facilitate the construction of more affordable housing and also the preservation of existing affordable housing. It also includes the first ever policies and objectives related to sustainability in green building, and for the first time includes an objective that directs the City to “ensure a streamlined, yet thorough, and transparent decision-making process.”

Please let us know if you have any questions about the Housing Element process, or how to find a copy of the Draft 2009 Housing Element that is on the Planning Department’s website. We look forward to bringing you more in-depth analysis of a number of Housing Element topics in 2010.

Our update team will be taking a break for the holidays. Our next issue will be the week of January 4, 2010. Happy holidays to all of our clients and friends.

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

 

 

California law provides contractors and developers protection against indefinite liability exposure by limiting the time within which an action may be brought for construction defects. Generally, an action for patent defects (defined by statute as “a deficiency which is apparent by reasonable inspection”) must be brought within four years from substantial completion of an improvement. An action for latent defects (defined by statute as “a deficiency which is not apparent by reasonable inspection”) must be brought within three or four years from the date of discovery of the defect but in any case within ten years from the date of substantial completion of the improvement.

The ten-year statute of repose for latent construction defects is commonly regarded as an “absolute” limitations period, meaning that the ten-year limitations period applies regardless of when the defect was discovered. Thus, it is a marker upon which a contractor or developer may rely in making insurance coverage and other business decisions.

However, while the legislature created the ten-year period to address “economic effects of indefinite ‘long tail’ defect liability on the construction industry” (Lantzy v. Centex Homes (2003) 31 Cal. 4th 363, 374), there are a number of exemptions to the limitations period, including actions based on willful misconduct or fraudulent concealment, or a cross-complaint for indemnity in an action that is commenced within the ten-year limitations period. In addition, courts have created an exemption based on principles of equitable estoppel. The legislature and courts view the exemptions as a reasonable balancing of the need for consumer redress and construction industry economic stability.

Willful Misconduct

Understanding how some of the exemptions work can help contractors and developers avoid their potential pitfalls. For example, in one case, the court determined that plaintiffs had sufficiently pleaded a claim for contractor/developer willful misconduct where experts identified alleged defects, stated that the defects involved conspicuous failures of subcontractors to comply with the building code, and expressed the opinion that the defects could not be present without the tacit or express approval of the contractor/developer. Thus, a court may charge a contractor/developer with willful misconduct where it has not actively participated in the acts causing harm and allowed plaintiffs to move forward against the contractor/developer despite that the ten-year limitations pCeriod had expired.

Cross-Complaint for Indemnity

Likewise, where a plaintiff sues for alleged defects, a defendant may bring a cross-complaint for indemnity even where the ten-year limitations period has passed, so long as the plaintiff filed its action prior to the expiration of the ten-year limitations period. In theory, liability based on a claim for indemnity could extend for years past the end of the ten-year limitations period. Such an exception is of particular relevance to subcontractors, who may not be named in the original complaint.

Equitable Estoppel

Finally, a court may employ equitable estoppel to extend the “absolute” ten-year limitations period. “Equitable estoppel addresses circumstances in which a party will be estopped from asserting the statute of limitations as a defense to an admittedly untimely action because his conduct has induced another into forbearing suit within the applicable limitations period. It…takes its life from the equitable principle that no man [may] profit from his own wrongdoing in a court of justice.” Bomba v. W. L. Belvidere, Inc. (1978) 579 F.2d 1067, 1070.

Even though Bomba purports to require some contractor/developer wrongdoing, ” ‘[a]n estoppel may arise although there was no designed fraud on the part of the person sought to be estopped. To create an equitable estoppel, ‘it is enough if the party has been induced to refrain from using such means or taking such action as lay in his power, by which he might have retrieved his position and saved himself from loss.'” Vu v. Prudential Property & Casualty Ins. Co. (2001) 26 Cal.4th 1142, 1152-1153. Accordingly, (1) if a contractor or developer represents, while the limitations period is still running, that all actionable damage has been or will be repaired, thus making it unnecessary to sue, (2) the plaintiff reasonably relies on this representation to refrain from bringing a timely action, and (3) the representation proves false after the limitations period has expired, the contractor or devleoper may be equitably estopped to assert the statute of limitations as a defense to the action. Thus, in such circumstances, a contractor or developer may find itself defending against an action after expiration of the ten-year limitations period.

In sum, while the ten-year statute of limitations provides some protections against never-ending construction defect liability, the exemptions make up an important component of the “absolute” ten-year limitations period and knowing the exemptions is the first step to avoiding them.

ERRATA – Land Use Note – Stimulus Package Moved to Jan. 14, 2010

Note that the first public hearing at the Planning Commission on the Mayor’s Real Estate Simulus Package has been moved to January 14, 2010.

 

Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

 

 

A proposed ordinance making its way through the Board of Supervisors would significantly restrict the ability of owners of newer rental properties to evict their tenants, which would then cause an indirect restriction on condominium sales. Currently, the city’s Residential Rent Stabilization and Arbitration Ordinance places strict controls on rental rates (rent control) and also restricts the ability to evict a tenant to a list of “just causes” for owners of rental properties constructed before June 13, 1979. Owners of rental properties constructed after that date are able to freely set rents and evict tenants for any reason that is otherwise permitted by state and federal law. The proposed ordinance would place the “just cause” eviction restrictions upon these post-1979 properties as well. It would not, however, impose rent control on these units. In other words, owners of post-1979 properties would continue to be able to set rents without restriction. However, tenants would be essentially entitled to “lifetime” leases, as long as there is no “just cause” for eviction, as defined by the ordinance.

Commonly asserted “just causes” for eviction include:

• Non-payment of rent or habitual late payment of rent;

• Breach of a rental agreement or lease;

• Owner move-in or an owner’s relative move-in;

• To perform capital improvements which will make the unit temporarily uninhabitable while the work is being done;

• To perform substantial rehabilitation of a building that is at least 50 years old, provided that the cost of the proposed work is at least 75% of the cost of new construction;

• To withdraw the rental units from the rental market under the Ellis Act;

• Creation of a nuisance or substantial interference with the landlord or other tenants in the building; and

• To demolish or permanently remove a rental unit from housing use.

One of these “just causes,” or any of the others specified in the ordinance, would be the only legal reasons to justify the eviction of a tenant in post-1979 properties if the ordinance passed. However, as a practical matter, it is often difficult to convince a court to find in favor of a “just cause,” and landlords typically pay substantial settlements to tenants that are fighting an eviction, even if the eviction is lawful, in order to expedite the eviction and avoid protracted legal battles.

Supervisor David Chiu introduced an amendment to the draft ordinance during the last Land Use and Economic Development Committee hearing that would benefit condominium developers that are forced to rent their units for a time before selling due to market conditions. Under the amendment, a new “just cause” for eviction would be added that would allow eviction when the landlord intends to sell the unit, so long as the tenant has been notified of the landlord’s intent to sell the unit in the future, and that the landlord either give 90 days notice prior to the eviction or pay the tenant’s relocation costs. This is a significant change, as condominium developers will be able to rent units during the downturn in the housing market without the risk of being stuck with long-term leases when the sales market picks up again. However, any owner of a newly-constructed residential building who has, as of the date of the ordinance, rented out condo units to tenants with the intention of later evicting the tenant to sell the condo must notify the tenant within 90 days of the passage of the ordinance of such intention.

On the other hand, owners of individual condo units that are rented out (as opposed to developers of an entire project), however, would have no ability to evict a tenant in order to sell their unit. That is, they could be stuck as a landlord unless they can find a buyer who is willing to purchase the unit subject to the lease, and then commence an owner move-in eviction process.

Beyond merely restricting evictions to listed “just causes” for post-1979 rental properties, the ordinance would also require a “just cause” in order to remove any housing services, such as garages, laundry rooms or decks. Property owners would be required to pay relocation expenses of up to $14,825 per unit (based on the number of tenants) for certain evictions – and more if the tenant is elderly, disabled or the household includes a minor. Also, an owner cannot increase the rent unreasonably with the intent to force their tenant to move out. This limitation on rental increases could give rise to significant litigation over whether the rent was “reasonably” increased, and what the owner’s true motive was.

Due to the way the ordinance is drafted, it may have other effects on post-1979 properties. If you have any questions regarding your rental property, or have questions regarding the ordinance, contact Kevin Rose or John Kevlin at 415-567-9000. We will continue to keep you updated on the progress of this proposed ordinance.

Vacant Property Registration Ordinance Materials Released

We reported to you a few months back that a new ordinance was passed by the Board of Supervisors last summer that placed substantial new requirements on owners of vacant buildings. The ordinance became effective October 1st, and the Department of Building Inspection is now taking steps to implement it. The Department sent out letters to owners of properties it believes are vacant this month, requesting they submit a registration form for their property. The registration form, along with the notification letter and other materials are located at “http://sfdbi.org/index.aspx?page=449.” Failure to comply will subject owners to increased fees and enforcement action. Contact John Kevlin at 415-567-9000 or if you have any questions about your building’s compliance.

 

Real Estate Stimulus Hearing Schedule ***Updated***

The real estate development industry needs this stimulus! Make sure you voice your support at one of these future hearings:

December 10 – Planning Commission (rescheduled from December 3)
December 19 – Building Inspection Commission
January – Board of Supervisors Land Use and Economic Development Committee

 

 

Last week, the Planning Department released the highly anticipated draft of the Transit Center District Plan (“Plan”). The comprehensive plan aims to transform the area surrounding the proposed Transbay Transit Center into the new heart of downtown. The Plan includes a package of zoning changes, including height increases, expanded protections for historic buildings, and the elimination of maximum floor area ratio (“FAR”) limits. The Plan also includes an ambitious program of public improvements to be financed by an equally ambitious package of impact fees and exactions on new development.

Regional Smart Growth Goals

According to the Association of Bay Area Governments, San Francisco needs to accommodate 23.5 million square feet of downtown office space over the next 25 years in order to meet goals for regional smart growth. This is the minimum amount of office space that San Francisco needs just to maintain its current share of regional employment, which declined from 27 percent in 1970 to just16 percent today.

The amount of office space that can realistically be built downtown under existing zoning caps out at approximately 5.8 million square feet. The implications of the shortfall are significant. It means that San Francisco risks losing its preeminent position at the center of the Bay Area’s economy. Regional sustainability goals will be jeopardized as jobs move to suburban locations where workers generate far more greenhouse gas and other emissions.

The combination of height increases and reduced FAR restrictions in the Plan will move the City closer to meeting its smart growth obligations. However, significant shortfalls will remain. The Plan proposes a modest increase of about 2.5 million square feet of new office development, or enough for roughly 10,000 workers. This would still leave the City 13 million square feet short of the projected citywide need for office space.

Skyline Sculpting: Form Over Function?

Height increases are among the most publicized aspects of the Plan. On the site of the proposed Hines-Pelli Transit Tower, the height limit will increase to nearly 1000 feet to make way for the City’s tallest building. Smaller increases, ranging from 50 feet to 300 feet, would allow a handful of buildings on other sites to exceed the area’s current 550-foot height limit.

The Plan continues the Planning Department’s practice of deliberately “sculpting” the City’s skyline into a distinct “hill form” with the Transit Center at its peak. This configuration is intended to emphasize both the Transit Center as the center of downtown and to symbolize the City’s commitment to transit-oriented development. Heights on other properties were limited to achieve the desired effect, with height limits generally decreasing in 150 foot increments to create a distinctive mound of high rise development. On the flip side, the Plan requires that the Transit Tower reach a minimum height of 950 feet. If the developer were to downsize the project from the current proposal, it would have to “include an architectural feature that extends the effective height” up to the desired minimum.

The practice of skyline sculpting has been criticized as an arbitrary constraint on development where dense development is key to meeting planning goals. According to the Plan, the singular height of the Transit Tower reinforces the “primacy of public transit in organizing the City’s development pattern.” Ironically, however, the symbolic gesture here comes at the expense of building height-and potential transit-oriented development-on other properties.

New Development Controls

The Plan includes new design guidelines and zoning controls to shape new development:

• Rezoning to C-3-0(SD). The Plan will rezone most C-3-O (Downtown Office) properties in the district to C-3-O(SD) (Downtown Office Special District). The primary difference between the two is that the base FAR limit in the C-3-O(SD) is 6-to-1 and the base FAR limit in the C-3-O is 9-to-1. The practical effect of the change is to require project sponsors to purchase more transferable development rights (TDR’s) before they build.

• Limits on Non-Commercial Uses. Projects on development sites larger than 15,000 sq. ft. that are within a core subdistrict and with an FAR over 6-to-1 would be required to provide at least three square feet of commercial space for every one square foot of residential, hotel, or cultural space.

• New Minimum FAR Controls; FAR Maximums Eliminated. Developments sites larger than 15,000 sq. ft. in size would be subject to a minimum FAR of 9-to-1. Maximum FAR limits, currently 18-to-1 in most of the Plan Area, would be eliminated entirely. FAR above the base limit could only be built through the purchase of TDR and/or payment of impact fees. (See fee discussion below).

• Bulk Controls. The Planning Code defines three key building sections for purposes of bulk controls: a base, a lower tower, and an upper tower. The Plan would require that the tower of a building be setback from the base by at least 10 feet for at least 60 percent of the buildings frontage. Bulk controls on towers over 600 feet would be reformed to account for their larger structural cores. The lower towers would have to be set back from the base, but other bulk controls would not apply to the lower tower. The average floor-plate size in the upper portion of such towers could be, at most, 75 percent of the average floor-plate size in lower towers.

• Pedestrian-Oriented Design. Improving the “bleak” pedestrian environment is among the Plan’s major goals. Below 20 or 25 feet in height, buildings should include façade treatments that create a “pedestrian zone.” The street frontage devoted to lobbies would be restricted. Active retail or open space uses would be required at the rest of the ground-floor frontage. Certain non-active uses (notably banks and gyms) would not be allowed at the ground-floor.

• New Historic Designations and TDR Reform. The existing New Montgomery-Second Street Conservation District would be extended to the west to include several properties along Mission and Hunt Streets. New individual ratings would be applied to buildings throughout the district.

Although some newly designated historic buildings will be eligible to transfer development rights under the Plan, a significant shortfall in TDR’s are expected. Without changes in the program, new development would be stymied by the shortfall. The Plan will provide some relief by requiring TDR only for FAR between 6-to-1 and 9-to-1. Alternatively, developers could elect to pay a new city fee with revenues flowing to qualified preservation projects. The amount of the fee has not been set but would be set at a price higher than the historical average market price for TDRs. FAR over 9-to-1 would no longer be subject to the TDR program, but would be subject to new impact fees. (See discussion below).

• Open Space. Most commercial developments are now required to build one square foot of open space for every 50 square feet of development. The plan would leave the requirement in place, but allow an in-lieu fee payment to satisfy it. The fee has not been set but is expected to be between $500-$750 per square foot of required open space.

• Parking. The Plan includes many new regulations intended to discourage the number of cars entering and traveling through the area. These include new rules on the quantity and pricing of parking in commercial developments, as well as restrictions on the points of access to parking garages.

Ultimately, the Plan calls for an absolute maximum on parking in the area. Until the cap is established by a future study, the Plan would limit accessory parking to 3.5 percent of a commercial building’s gross floor area, i.e., half of what is currently allowed. In addition, new curb cuts on Mission Street, Second Street, and several pedestrian alleys would be prohibited. A conditional use approval from the Planning Commission and approval by the Board of the Municipal Transportation Agency would be required for new curb cuts on First and Fremont Streets or for non-accessory parking. New surface parking lots would prohibited, even as temporary uses.

The Plan calls for the parking tax to be applied to parking spaces that are provided at no cost to building tenants, or which are bundled in commercial leases. It also calls for more stringent enforcement of rules that prohibit new parking facilities from offering discounted rates for monthly or daily parking.

• Sustainability. The Plan calls for ratcheting up the City’s already stringent green building standards with an eye toward improving energy performance and water consumption.

Fees and Public Improvements.

The Plan outlines a new fee structure to fund its program of public improvements. The improvements include numerous upgrades to the streets (sidewalk widenings, potential street closures, landscaping)as well as public open spaces and transit improvements. Although these new amenities would create broad benefits for downtown and the City as a whole, the fees would apply only to new development projects in the Plan Area.

• Transit Center Impact Fee. The Plan includes two preliminary proposals for an impact fee. The first is a flat fee that would apply uniformly to all new development. The Plan floats fee levels ranging from $5 to $30 per square foot. Recent plans in and around downtown have included similar fees at $25 per square foot.

The second alternative is a tiered fee that would increase with building FAR. All square footage would be subject to a fee of $5. Square footage above an FAR of 9-to-1 would be subject to an additional fee of $25 for a total of $30 per square foot. Square footage above an FAR of 20-to-1 would be charged an additional $5 for a total of $35 per square foot.

• Mello-Roos Tax. The Plan calls for establishing a Mello-Roos Community Facilities District (“CFD”). New developments in the CFD would be required to pay a tax of 0.35 percent of assessed value, which would raise the effective property tax rate to 1.5 percent total.

• Benefit Covenant. A benefit covenant imposes a supplementary transfer fee that is payable to the City on the sale of a property. The Plan proposes that the fee be set at one percent of a property’s sale value. This fee would apply only to (a) properties transferred to private owners from public agencies, (b) properties located in Zone 1 of the Transbay Redevelopment Area, which overlaps the southern portion of the Plan Area, or (c) properties whose owners enter into a development agreement with the City.

Although the Plan contains lengthy discussion of the feasibility of new fees, its conclusions are largely based on 2007 property values and rental rates, which have dropped by as much as half and show no signs of rebounding in the near term. As well, the feasibility study did not evaluate the financial impact of existing fees and taxes, or the funding that would be generated by them. The net effect of these oversights is to understate the actual funding stream that would be created by newly built projects, while overstating their ability to absorb new fees.

The Planning Commission is expected to announce a series of public hearings to take public testimony on different aspects of the plan. The Planning Department is expected to release the Draft Environmental Impact Report on the Plan in summer of 2010.

If you have any questions about the Plan, please contact Daniel Frattin at 415.567.9000 or by email at “dfrattin@reubenlaw.com.”